VisitBritain: Bringing visitors to BritainGreat Britain as a value for money destination. c Parts of the industry sometimes feel they have to compete against VisitBritain's short term

REPORT BY THE COMPTROLLER AND AUDITOR GENERALHC 1160 Session 2003-2004; SE/2004/248: 12 November 2004

VisitBritain: Bringing visitors to Britain

The National Audit Officescrutinises public spending

on behalf of Parliament.

The Comptroller and Auditor General, Sir John Bourn, is an Officer of the

House of Commons. He is the head of theNational Audit Office, which employs some800 staff. He, and the National Audit Office,

are totally independent of Government.He certifies the accounts of all Government

departments and a wide range of other publicsector bodies; and he has statutory authority

to report to Parliament on the economy, efficiency and effectiveness

with which departments and other bodieshave used their resources.

Our work saves the taxpayer millions ofpounds every year. At least £8 for every

£1 spent running the Office.

LONDON: The Stationery Office£8.25

Ordered by theHouse of Commons

to be printed on 8 November 2004

REPORT BY THE COMPTROLLER AND AUDITOR GENERALHC 1160 Session 2003-2004; SE/2004/248: 12 November 2004

VisitBritain: Bringing visitors to Britain

This report has been prepared under Section 6 of theNational Audit Act 1983 for presentation to the Houseof Commons in accordance with Section 9 of the Act;and presented to the Scottish Parliament in accordancewith Section 88 of the Scotland Act 1998.

John Bourn National Audit OfficeComptroller and Auditor General 3 November 2004

The National Audit Office study team consisted of:

Helen Anderson, Sallie Danagher, Keith Davis,Keith Hawkswell and Andy Morrison

This report can be found on the National Audit Officeweb site at www.nao.org.uk

For further information about the National Audit Officeplease contact:

National Audit OfficePress Office157-197 Buckingham Palace RoadVictoriaLondonSW1W 9SP

Tel: 020 7798 7400

Email: [email protected]

© National Audit Office

ContentsSummary 1

Recommendations 4

Part 1

Recent events have focused attention 7on the tourism industry and this reportexamines the effectiveness of VisitBritain'soverseas marketing activities

Tourism is one of the largest industries in Britain 7though recent events have put tourism growth at risk

VisitBritain is the national tourism organisation 9for Great Britain

The report looks at how effective VisitBritain's 11overseas marketing activities are at increasing inbound visitors to Britain

VISITBRITAIN: BRINGING VISITORS TO BRITAIN

Photography by Britainonview.com / Rod Edwards / Martin Brent

Part 2

VisitBritain's overseas marketing 13activities are well planned and executed

VisitBritain produces good business cases for 13campaigns and has a sound approvals process

Many campaigns are supported by 13partnership funding

VisitBritain has a range of research and data to 14underpin its campaigns and is improving its visitor satisfaction work

VisitBritain is improving its awareness of best 15practice among other national tourism organisations

VisitBritain's partners are generally satisfied with 16the organisation's overseas marketing activities though some businesses feel excluded from theplanning process

Overall VisitBritain is moving towards more 19cost-efficient customer interfaces

Part 3

VisitBritain's overseas marketing 21activities achieve a high return

VisitBritain aims to return £29 to the 21United Kingdom economy for every pound it spends in 2004-05

Non-government funding is not included in 22the calculation

VisitBritain's return on investment figure is 23overstated due to the treatment of non-respondents

In other respects there are likely to be under- 24estimates of the return on investment

The questionnaire response options on 24extended stays are less refined than those oninfluenced to visit

The data on spend per visitor has some weaknesses 24

Part 4

There is a tension between VisitBritain's 25long and short term objectives

The emphasis on return on investment leads to 25VisitBritain focusing on short term tactical campaigns

There is a risk that partnership funding can 25cause VisitBritain's campaigns to be even more focused on short term objectives and that smallerbusinesses can feel excluded from the benefits

Parts of the industry are concerned that they 26sometimes have to compete against VisitBritain's campaigns

The tourism industry wants VisitBritain's 27campaigns to give more emphasis to promoting the Britain brand

The emphasis on the return on investment measure 28may act as a disincentive to VisitBritain working in emerging markets

Greater clarity about VisitBritain's role and 29responsibilities in relation to those of other publicly funded tourism bodies would help inpromoting the Britain brand

Appendix

Methodology 30

Summary


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1 VisitBritain is Britain's national tourism organisation and is sponsored by theDepartment for Culture, Media and Sport. In 2003-04, £35.5 million ofVisitBritain's £49.2 million grant-in-aid was allocated to marketing Britain as atourist destination overseas. Most of its remaining budget is spent on marketingEngland within Britain. This report looks at the effectiveness of VisitBritain'soverseas marketing activity.

2 Below we set out our overall conclusions in relation to each of our three mainthemes together with the related key points.

The planning and execution of VisitBritain's overseasmarketing activities3 The planning and execution of VisitBritain's overseas marketing activities is

generally good although there is room to further improve its communicationand consultation with the tourism industry.

4 Specific key findings in this area are set out below.

a Comprehensive business cases are prepared before funds are committedto campaigns.

b VisitBritain uses a good range of research and data to inform its decisionsand it is improving the extent to which it evaluates the relative importancethat visitors attribute to the different elements of the visitor experience andhow satisfaction affects the likelihood of return.

c In many respects the tourism industry is satisfied with the work ofVisitBritain, though some feel the industry could be more involved inVisitBritain's decisions on prioritisation of markets and campaign content.VisitBritain is currently working to improve its communication with thetourism industry and the feedback it provides.

d VisitBritain puts considerable effort into communicating with the industry,which acknowledges improvements but still feels it could be betterinformed, particularly about future VisitBritain campaigns.

e VisitBritain is moving away from expensive walk-in centres in prime citycentre locations (for example, it has offices on Fifth Avenue in New York)towards more cost-effective customer interfaces such as call centres, theinternet and direct marketing using an enhanced customer database.

The impact of VisitBritain's overseas marketing activity5 The main measure that VisitBritain uses in reporting its impact is the amount of

additional expenditure by overseas visitors that its activities generate - thereturn on investment. VisitBritain has a detailed system in place for measuringthe additional expenditure for which it can claim credit. While there are someweaknesses in VisitBritain's approach to measurement, there is little doubt thatits activities are generating high returns.

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a In 2003-04 VisitBritain reported that its overseas marketing activitiesgenerated £30 in additional expenditure for every £1 of public funds thatit spent.

b The ratio between the benefits and costs of VisitBritain's activity is lower,though still high, (at around £25 to £1) if partnership funding from theprivate sector, which totalled £7.22 million for its overseas marketingactivities in 2003-04, is taken into account on the cost side.

c There are some weaknesses in the way that VisitBritain collects and analysesinformation about the extent to which people have been influenced byVisitBritain. In particular, returns are likely to be overstated by the wayVisitBritain treats non-respondents to its questionnaires, but understatedbecause respondents who say they were 'probably' (as opposed to'definitely') influenced are excluded from the calculation. Research carriedout for VisitBritain concluded that it is not possible to determine whetherthe net impact of the different weaknesses is an overall understatementor overstatement.

d The data that VisitBritain uses on visitor spending in Britain comes from theOffice for National Statistics. It is compiled primarily for balance ofpayments and migration purposes and while it has some limitations forVisitBritain's purposes, for example it excludes travel to and from Britain, itis not clear that there is a cost-effective alternative available to VisitBritain.

The balance between VisitBritain's long and short termactivities and targets7 To achieve its annual return on investment target, and to respond to crises,

VisitBritain has undertaken short term tactical campaigns1, often withpartnership funding from the 'big players' in the industry or bodies representingthe destinations being promoted. While VisitBritain has improved its brandbuilding and begun work to stimulate interest in Britain as a tourist destinationwithin emerging markets, the need to achieve its annual return on investmenttarget limits VisitBritain's ability to make these a priority. The emphasis onreturn on investment may also mean that the main beneficiaries from some ofVisitBritain's activities are larger businesses (who are more able to providepartnership funding), though small businesses do derive benefit too. TheDepartment for Culture, Media and Sport and VisitBritain are looking at how toaddress these problems.


a Short term tactical campaigns were put to good effect in 2001-02 after thefoot and mouth outbreak and the terrorist attacks on September 11th, andsome of these campaigns, such as 'Only in Britain, Only in 2002' includedan element of brand building.

b Where VisitBritain is partly reliant on large contributions from the 'bigplayers' in the industry, the effect can be that the presence in campaigns ofoffers from specific operators leaves less room to promote the uniquenessof the Britain brand. However, these offers do have the benefit of showingGreat Britain as a value for money destination.

c Parts of the industry sometimes feel they have to compete againstVisitBritain's short term campaigns because these include offers from their rivals.

1 The primary aim of short term tactical campaigns is to encourage as many tourists as possible to visitBritain within a defined time period. To encourage visitors, attractive prices on specific travel and accommodation options are offered as part of the campaign.

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d The consensus in our stakeholder groups was that VisitBritain should leave private businesses to sell the means by which visitors can travel, stayand explore.

e Instead stakeholders would like VisitBritain to give more emphasis topromoting Britain as a destination, and in this regard we noted thatVisitBritain has made important recent improvements to its efforts to raisethe profile of the Britain brand of 'depth, heart and vitality'. For example ithas a dedicated web presence in thirty-five markets in the local language.

f Stakeholders would also like VisitBritain to focus more on attracting long-haul visitors and developing new markets. However the need to achieve itsannual return on investment target could be a disincentive to VisitBritainworking in emerging markets because newly promoted brands often takesome time to penetrate before returns are realised.

g Greater clarity about VisitBritain's role and responsibilities in relation tothose of other publicly funded tourism bodies would help in promoting theBritain brand; VisitBritain and the Department for Culture, Media and Sportare working with the other bodies to address this.

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The return on investment targeti The Department for Culture, Media and Sport should retain return on

investment as a key measure of VisitBritain's performance. It provides a clear focus on efficiency and on the need for economic impact fromVisitBritain's work.

ii The Department for Culture, Media and Sport and VisitBritain should,however, avoid any perverse effect of placing too much emphasis on shortterm returns. Developing other targets to measure VisitBritain's longer termactivities to establish the Britain brand, and develop new and emerging marketswould help. For example, there could be return on investment targets for, say,three or more year's time and for particular markets.

iii VisitBritain should strengthen the way it measures and reports the return oninvestment. Specifically VisitBritain should:

a report the ratio between all its campaign funding (public and private) andadditional visitor spending;

b calculate additional visitor spending on the basis of a more cautiousassumption about the behaviour of non-respondents to its questionnaires.Until better information is available, as an interim measure a deduction of20 per cent from the total additional spend claimed should be made;

c include in the calculation of additional visitor spending, a proportion (therecommendation of 50 per cent from recent research would provide a goodbasis) of respondents who said they were 'probably' influenced to visit;

d refine the response options in the part of its questionnaire that asks aboutextensions to stays; and

e publish clear information to enable industry and others to understand thebasis of its methodology for calculating return on investment.

Changes to the methodology will need to be implemented with care so that, inthe interim, performance can still be reported on the same basis as that usedfor setting the original target.

Recommendations

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Relationship with the tourism industryiv While communication with the tourism industry will always be difficult

because of its fragmented nature, VisitBritain should take care to ensure thatit is not just financial partners that are included in its general communicationwith the industry, and that all parts of the industry feel they have opportunitiesto provide strategic input to VisitBritain's activities. Cost-effectiveness isimportant, and reaching a wide audience by communicating with tradeassociations may sometimes be better than dealing with individual businessesdirectly, provided VisitBritain is clear about the approach taken todissemination of information by the associations.

v VisitBritain should make regular detailed assessment of which parts of thetourism industry are benefiting from its activities. As part of this it should seewhether smaller businesses can be better integrated into marketing activities,for example by receiving greater prominence on VisitBritain's website.

Position in relation to other national and regionaltourist organisationsvi VisitBritain and the Department for Culture, Media and Sport should review

regularly whether their recent initiatives to clarify the roles andresponsibilities of the various organisations are proving to be effective atreducing confusion within the industry.

Part 1


Recent events have focused attention on the tourist industry and this report examinesthe effectiveness of VisitBritain's overseasmarketing activities

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1.1 The tourism industry is becoming increasinglycompetitive. Worldwide, more and more countries areacknowledging the potential economic contribution oftourism. At a global level the World Tourism Organisationforecasts that tourism growth trends will continue - therewere almost 715 million international tourist arrivalsworldwide in 2002, 22 million more than in 2001 - andit is currently predicting that the number of internationalarrivals worldwide will reach over a billion by 2010.2

1.2 The emergence of tourist destinations, for example, inAsia, the Americas and Eastern Europe, and the visitor'sdesire to search for new experiences, however, willmake it increasingly difficult for relatively maturedestinations such as Britain to capture its share of thisincreasing global tourism market. Figures for 2003 showthat the United Kingdom3 was sixth behind the UnitedStates of America, Spain, France, Italy, and Germany inthe tourism earnings league (Figure 1).

Tourism is one of the largest industries in Britain though recent events have puttourism growth at risk1.3 The tourism industry is an important economic driver in

Britain. It is of particular importance in the developmentof regional, urban and rural economies, providinginfrastructure through investment, creating jobs andgenerating wealth. Figure 2 provides some key factsabout the British tourism industry.

The world's top tourism destinations in terms ofinternational tourism receipts

1

Source: 'World Tourism Barometer', World Tourism Organisation, June 2004.

NOTE

1 Percentages have been calculated using more precise dataand may therefore appear to be incorrect.

Key tourism facts

� Tourism is one of the largest industries in theUnited Kingdom1, worth some £74.2 billion andaccounting for around 4.5 per cent of Gross Domestic Product.

� Tourism supports 2.1 million jobs, 7.4 per cent ofGreat Britain's total workforce, with an additionaljob created for every £40,000 spent by visitors.

� The industry is highly fragmented and diverse. In2003 there were around 107,535 hotel and cateringbusinesses in Great Britain2, most with a turnover ofless than £250,000.

� VisitBritain estimates that United Kingdom3 tourism has the potential to be worth well over £100 billion by 2010.

NOTES

1 This figure is an estimate derived from a number of sources, none of which provide figures for Great Britain only.

2 Hotel and catering businesses include hotels, youth hostels, mountain refuges, camping and caravan sites, bars, restaurants, canteens and catering.

3 This figure is an estimate which appears in 'Tomorrow's Tourism Today' published by the Department for Culture, Media and Sport, July 2004. The estimate referred to in 'The Plan', VisitBritain 2004-05 is derived from a number of sources, none of which provide figures for Great Britain only.

Source: VisitBritain

2

2 'Vision on Tourism 2010'. World Tourism Organisation.3 The World Tourism Organisation does not produce figures for Great Britain, only the United Kingdom.

Rank, Country US US % %$billion $billion change change2003 2002 2002-03 2002-03

(estimate) US$1 localcurrencies

1 United States 65.1 66.5 -2.2 -2.2

2 Spain 41.7 33.6 24.1 3.7

3 France 36.6 32.3 13.2 -5.4

4 Italy 31.3 26.9 16.2 -2.8

5 Germany 23.0 19.2 20.0 0.3

6 United Kingdom 19.4 17.6 10.5 1.4

7 China 17.4 20.4 -14.6 -14.6

8 Austria 13.6 11.2 21.0 1.2

9 Turkey 13.2 11.9 10.9 10.5

10 Greece 10.7 9.7 9.9 -8.2

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1.4 The World Tourism Organisation predicted that, at thebeginning of the twenty-first century, the propensity forpeople to travel would be stronger than at any othertime in modern history, and estimated that touristswould take over one billion trips every year by 2010.However, the World Tourism Organisation highlightedhow growth in tourism worldwide has been put at riskby a general downturn in the global economy,increasing fears of terrorist activity and the impact ofevents such as the outbreak of acute respiratorysyndrome (SARS) in early 2003 and the war in Iraq.

1.5 Figure 3 shows the trends in tourist numbers andspending in Britain in relation to the occurrence of footand mouth disease, the terrorist attacks onSeptember 11th, the outbreak of SARS, and the war inIraq. Visitor numbers picked up more quickly thanspending after the foot and mouth and September 11thcrises. High spending North American visitors were stillunsure about travelling and visitors came mainly fromWestern Europe, taking predominantly shorter breaksand spending less money.

Numbers of overseas visitors and their spending levels - 1998 to 2004 3

Source: National Audit Office and VisitBritain

0

5

10

15

20

25

30

1998

Visitor Number (million) Visitor Spend (£ billion)

1999

Foot and Mouthoutbreak 9/11 Iraq War

2000 2001 2002 2003 20041

NOTE

1 Figures for 2004 are based on VisitBritain estimates.

SARS

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1.6 The latest International Passenger Survey4 figures showthat in 2003 there were 24.8 million overseas visitors tothe United Kingdom (a 2.2 per cent increase comparedwith 2002) who spent £11.9 billion (a 1.05 per centincrease on 2002). Provisional data for the firsteight months of 2004 indicate further increases in thenumber (up 13 per cent on the first eight months of2003) and spending (up nine per cent) of overseasvisitors to the United Kingdom.6

VisitBritain is the national tourismorganisation for Great Britain7

1.7 Since the establishment of the British Tourist Authority inthe Development of Tourism Act 1969, the Governmenthas funded international marketing to ensure growthtrends in international visitors to Britain are maintainedand increased. In 2001, a review8 commissioned by theDepartment for Culture, Media and Sport concludedthat the Government should continue to fund tourismactivity to help correct market failure by providing theindustry with impartial information, undertakingdestination marketing and providing small and mediumsized businesses with a route to market.

1.8 On 1 April 2003 the British Tourist Authority and theEnglish Tourism Council were merged to formVisitBritain, the new national tourism organisation forGreat Britain.9 VisitBritain is a non-departmental publicbody, operating within a policy and financial frameworklaid down by its sponsor - the Department for Culture,Media and Sport. Essentially, VisitBritain fulfils the twinroles of marketing Britain to the world and promotingEngland as a tourist destination within Britain. Itsfunctions and goals, as set out in VisitBritain'sFunding Agreement for the period 2003-04 to 2005-06with the Department for Culture, Media and Sport areshown in Figure 4.

1.9 VisitBritain received a grant-in-aid from the Departmentfor Culture, Media and Sport of £49.2 million in2003-04 - £35.5 million of which was allocated for thepromotion of Britain overseas, £10.4 million forpromoting England within Britain and £3.3 million forthe one-off costs associated with re-organisation.In addition VisitBritain also raised £17.2 million(£12.7 million for international activities and £4.5 million for domestic activities) in 2003-04 fromcommercial activities and joint ventures with the trade,and from public and private sector businesses (referredto as non-government funding or partnership funding).Figure 5 shows a breakdown of expenditure oninternational marketing activity in 2003-04.

1.10 VisitBritain employs 476 staff in London and across 31 overseas countries. In 2003 VisitBritain rationalisedits international office structure and now eight overseasregional hubs each administer a number of countryoffices, known as satellites. The eight regional hubs are:Nordic based in Stockholm; Central Europe in Berlin;Western Europe in Dublin; Southern Europe in Paris; theAmericas in New York; Asia in Hong Kong; Australasiain Sydney; and Middle East and Africa which is run fromLondon (Figure 6).


4 The International Passenger Survey is a sample survey carried out by the Office for National Statistics. Further details are provided in paragraph 3.5.5 Due to exchange rate fluctuations this equates to a 10.5 per cent change in international tourism receipts for the United Kingdom between 2002 and 2003

when United Kingdom pounds are converted to United States dollars (as shown in Figure 1).6 Equivalent figures for Great Britain are not available.7 VisitBritain's remit covers Great Britain i.e. England, Scotland and Wales, but not Northern Ireland.8 A Quinquennial Review of the British Tourist Authority.9 For the purposes of clarity, in most cases the report refers to activities as VisitBritain's, regardless of whether some took place before 1st April 2003.

VisitBritain's functions and goals for the period 2003-04 to 2005-06

VisitBritain's Functions1

� To encourage people to visit Britain.

� To encourage people living in Britain to take theirholidays within the country.

� To encourage the provision of tourist amenities andfacilities in Britain.

� To advise Ministers and public bodies on mattersaffecting tourism to Britain (this is a statutory duty).

VisitBritain's Goals

� To promote Britain overseas as a tourist destination,generating additional revenue throughout Britainand throughout the year.

� To help the United Kingdom tourism industry toaddress international and domestic markets more effectively.

� To provide advice to Government on mattersaffecting tourism to Britain and contribute to widerGovernment objectives.

� To work in partnership with the devolvedadministrations (the Scottish Parliament and theNational Assembly for Wales) and the national andregional authorities.

� To oversee the development and implementation ofa domestic marketing strategy for England.

� To grow the value of the domestic market byencouraging people to spend more on tourismthroughout the English regions, throughout the year.

NOTE

1 Functions as laid down in the Development of Tourism Act 1969.

Source: VisitBritain's Funding Agreement with the Department forCulture, Media and Sport for the period 2003-04 to 2005-06

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1.11 Tourism is a devolved activity in Great Britain. Figure 7shows the legislative framework under which bothScotland and Wales have the authority to promote theircountry overseas. As one element of VisitBritain's remitis to build the value of inbound tourism to Britain, it isaccountable not only to the Department for Culture,Media and Sport and the United Kingdom Parliament,but also to the Scottish Parliament and the NationalAssembly for Wales.

1.12 Overseas Marketing Agreements (currently beingrevised and updated as tailored Memoranda ofUnderstanding) provide a formal framework for co-operation between VisitBritain and the network ofnational tourist boards across Great Britain with powers to promote their own country, and the Mayor of London's remit to promote the capital overseas.VisitBritain has specific agreements with theDepartment for Culture, Media and Sport, the nineRegional Development Agencies, and the regionaltourist boards (Figure 8).

Expenditure on international marketing activity in 2003-04

5

Expenditure £ million

Staff costs 14.120

Direct marketing1 7.989

Marketing support costs2 6.330

Operational support costs3 8.521

Net expenditure4 36.960

Non-government funding 12.771

Total Expenditure 49.731

NOTES

1 Costs directly attributable to a marketing activity.

2 Costs incurred directly in support of marketing effort,such as product marketing and customer relationshipmanagement and online marketing.

3 All property costs in Great Britain and overseas, costs ofthe finance and human resources functions, the costs ofthe office of the Chief Executive Officer, Chairman,Board, and the legal and secretariat functions.

4 The net expenditure figure for international marketingin excess of the grant-in-aid figure received for 2003-04is funded by grant-in-aid brought forward from 2002-03, transitional funding and reserves.


Americas

Nordic

EuropeWest

EuropeSouth

EuropeCentral

Asia

Australia/ New Zealand

Africa/ Middle East

VisitBritain’s overseas regional hubs 6


Regional Hub Functions

Admin/Finance/HRSegmentation/ ResearchContact Centre strategyDistributionMarketing - Branding - Market Intelligence - Database/CRMPotential Markets

Country Functions

Marketing executionTravel trade relationshipsLocal contact centre (as required)Gateway EditingPR and Media Relations

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The report looks at how effectiveVisitBritain's overseas marketing activities are at increasing inboundvisitors to Britain 1.13 This report concentrates on VisitBritain's work to build

the value of inbound tourism to Britain. In particular, weconsidered what VisitBritain is doing to:

� ensure overseas marketing activities are wellplanned and executed (Part 2);

� measure the returns it generates (Part 3);

� strike the right balance between long andshort term objectives (Part 4).

1.14 The methods we used, and a list of the experts weconsulted, are set out at Appendix 1. The main strandsof our approach were:

� interviews with the senior management teamat VisitBritain and officials at the Departmentfor Culture, Media and Sport;

� case reviews of marketing activities in theUnited States of America and France;

� two stakeholder focus groups, run byacademic tourism experts, to provide insightinto the industry's views about VisitBritain'soverseas marketing activities; and

� a panel of tourism experts to assist us with thescope, conclusions and recommendations ofour study.


The legislative framework for marketing Britain overseas

� The British Tourist Authority1, together with theEnglish Tourism Council (now combined in thenewly created VisitBritain), the Scottish TouristBoard (now known as VisitScotland) and the WalesTourist Board, the national tourist boards of GreatBritain, were created by the Development ofTourism Act 1969.

� Under the 1969 Act, the British Tourist Authoritywas charged with encouraging people livingoverseas to visit Great Britain and the nationalboards were given responsibility for promoting their nations domestically.

� In 1984, the Tourism (Overseas Promotion)(Scotland) Act gave VisitScotland - the first nationalboard - the authority to market Scotland overseas;in 1992, the Tourism (Overseas Promotion) (Wales)Act similarly gave the Wales Tourist Board theauthority to promote Wales overseas.

� Since 1998, the relationship between the BritishTourist Authority, VisitScotland and the WalesTourist Board has been formalised in an OverseasMarketing Agreement, overseen by a director-levelsteering group.

� In 1999, the Greater London Authority Act gave theGreater London Authority a duty to promote Londonas a gateway to the United Kingdom, as well aspromoting London as a destination overseas.

NOTE

1 On 1 April 2003, the net assets of the English Tourism Council were transferred to the British Tourist Authority, which commenced trading as VisitBritain on that date.

Source: National Audit Office

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Publicly funded tourism bodies in Britain 8

Principal role

To encourage Britishpeople to take holidays in Scotlandand to market Scotland overseas.

To encourage people tovisit Wales and peopleliving in Wales to taketheir holidays there.

To encourage theprovision andimprovement of touristamenities and facilitiesin Wales.

To act as strategicdrivers of regionaleconomic developmentin their region.

To promote their regionby marketing todomestic and overseasleisure and businessvisitors, as well as localsof the region themselves.

To encourage Britishand overseas visitors tovisit London.

Source of publicfunding

Scottish ExecutiveEducation Department.

Welsh AssemblyEconomic Developmentand TransportDepartment.

Also receives Objective1 funding from theEuropean Union.2

Pooled funding fromseveral Governmentdepartments.

Regional DevelopmentAgencies, DCMS (forVisit London), LocalAuthority membership.

Mayor of London,London DevelopmentAgency, DCMS,Association of LondonGovernment.

Level of public funding2003-04 (£ million)

36.51

39.0

Varying levels - includes£3.6 million Departmentfor Culture, Media andSport (DCMS) funding,ring-fenced for RegionalTourist Boards.

Varying levels.

17.4

Basis of relationshipwith VisitBritain

Memorandum ofUnderstanding settingout the respective roles,responsibilities andworking relationships inthe promotion of Britainand Scotland overseas.

Memorandum ofUnderstanding settingout the respective roles,responsibilities andworking relationships inthe promotion of Britainand Wales overseas.

Protocol that governsthe strategic relationshipbetween the partiessigned by the RegionalDevelopment Agencies,DCMS and VisitBritain

Concordat defining theworking relationshipbetween VisitBritain and regional deliverypartners agreed.Memorandum ofUnderstanding with VisitLondon under review.

Memorandum ofUnderstanding (underreview) setting out therespective roles,responsibilities andworking relationships inthe promotion of Britainand London both in theUnited Kingdom and overseas.

Tourism bodiesin Britain

VisitScotland (Nationaltourism organisation)

Wales Tourist Board(National tourismorganisation)

Regional DevelopmentAgencies (includingLondon)

Regional Tourist Boards(including Visit London- see below)

Visit London

NOTES

1 This figure includes £2 million funding for EventScotland, a joint venture between the Scottish Executive and VisitScotland.

2 The Objective 1 European Funding Programme started in 2000 and will run to 2006. Over the programme period, the European Unionwill contribute around £1.2 billion of Objective 1 aid to raise the Gross Domestic Product in West Wales and the Valleys.


Part 2

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2.1 This part of the report considers how VisitBritain plansand executes its overseas marketing activities. Inparticular it looks at VisitBritain's use of partnershipfunding to support its campaigns, the data and researchthat underpins VisitBritain's strategic business planning,and partner satisfaction with the organisation'sapproach to overseas marketing. It also coversVisitBritain's move away from expensive, resourceintensive walk-in visitor centres to the greater use ofcustomer relationship management systems as a meansof communicating with potential visitors to Britain.

2.2 Whilst VisitBritain's main activity is running campaignsit also invests in other activities, particularly press andpublic relations work, the development of businesstourism, trade relations, and exhibitions. VisitBritain'smedia and trade relations activity includes bringingoverseas journalists, travel specialists and agents toBritain on 'familiarisation' trips. During 2003-04VisitBritain arranged 702 press visits involving 780 participants to Britain including 123 visits (138participants) to Scotland and 49 visits (54 participants)to Wales. In 2003-04, VisitBritain reported anadvertising equivalent10 for its public relations work of £263 million. This figure was validated by anindependent tourism consultant.

2.3 To maximise the potential of the rapidly growing businesstourism11 market, VisitBritain has put in place a dedicatedbusiness tourism manager in each of its hub offices(Figure 6 on page 10) whose role is to establish a networkof local contacts across all markets, and provide advice tobusiness conference organisers and others, encouragingthem to place their business with British venues andcorporate hospitality suppliers. VisitBritain is alsoinvolved in the bidding process to win majorinternational conferences for Britain. VisitBritain estimatesthat the business tourism sector is worth around £16.7 billion12 to the United Kingdom economy, andconsiders that it also helps to address the seasonal andregional imbalance of the leisure tourism sector.

VisitBritain produces good business cases for campaigns and has a soundapprovals process 2.4 VisitBritain plans its individual marketing activities well.

A business case is produced for each campaign oractivity that highlights the target market segments, thenumber of anticipated visits and level of visitor spend,and the expected seasonal and regional benefits. It alsoclearly states which VisitBritain objective the activitywill directly address. Each regional hub submits itsbusiness plans and is then required to defend itsproposals. Campaigns are approved by the regionalmanager, the director of overseas operations, the chiefexecutive, or the Board, dependent on the proposedspend. The system is currently being developed furtherand VisitBritain's new Market Investment Model,introduced for the 2004-05 business planning round,encourages its overseas regional offices to competemore directly in making bids for future funds.

Many campaigns are supported bypartnership funding2.5 In 2003-04 VisitBritain raised nearly £13 million in non-

government funding through partnerships and otheractivities relating to its international work. A goodexample of this is the 'Only in Britain, Only in 2002'campaign (Figure 9) launched in April 2002. Thecampaign was a means to spearhead tourism recoveryfollowing the foot and mouth outbreak of 2001, and theterrorist attacks on September 11th.

Part 2 VisitBritain's overseas marketingactivities are well planned and executedVISITBRITAIN: BRINGING VISITORS TO BRITAIN

10 The advertising equivalent is the cost of purchasing advertising space commensurate to the editorial coverage generated by VisitBritain's press and public relations activity.

11 Business tourism covers visitors whose main purpose for travelling is to attend activities or events associated with their work. Main components of business tourism are conferences, exhibitions, trade fairs, incentive travel and corporate events.

12 This figure is an estimate derived from a number of sources, some of which include Northern Ireland and others which only quote figures for England and 'the rest of the United Kingdom'. Thus an estimate for Great Britain (England, Scotland and Wales) is not available.

2.6 Our stakeholder focus groups (Appendix 1 on page 31)considered that VisitBritain's requests for support tend tobe made at relatively short notice, and that organisationsstruggle to be involved as their own budgets are oftenallocated on a three year cycle. VisitBritain hasacknowledged the need to be more in tune with thefinancial planning cycles of the organisations it isapproaching. There are occasions when it has to launchcampaigns quickly, for example in reaction to the crisesof foot and mouth and the terrorist attacks onSeptember 11th. However, for its more regularcampaigns, VisitBritain is developing three year plans togive partners a clear idea of its direction, which it hopeswill encourage greater investment across markets incommon themes.

2.7 VisitBritain's tourism partners traditionally includeairline carriers, hotel chains and tour operators but onoccasion it has been more innovative, using lesstraditional and more unusual 'non-tourism' partners.Figures 10 and 11 show examples where VisitBritain hasaligned its Britain brand with non-tourism products tospread its message and extend the range of its partners.

VisitBritain has a range of research anddata to underpin its campaigns and isimproving its visitor satisfaction work2.8 VisitBritain has carried out numerous pieces of visitor

research in its key markets and has used this informationto ensure that its campaigns contain the right messages.Although VisitBritain's visitor research has provided avaluable source of information on how visitors ratevarious aspects of their stay, the research has not tendedto focus sufficiently on whether the experiences of thesevisitors matches up to their expectations, a key factor indetermining visitor satisfaction and retention.

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'Only in Britain, Only in 2002' campaign9

Aim: To attract an additional one million visitors to Britainduring 2002.

Government funding: £20 million (£19 million to theBritish Tourist Authority and £1 million to the EnglishTourism Council).

Partnership support from the tourism industry: £5.4 million in cash and £19.8 million of other assistance.

Examples of assistance: Free flights and hotelaccommodation - used for sweepstake prizes andpress/trade familiarisation trips; use of industry partners'advertising space; inclusion on industry partners' websites;special offers on prices.


Case study of Samsonite partnering VisitBritain in'Hidden Britain' campaign

10


Samsonite Luggage Promotion

Samsonite was a key non-tourism partner in VisitBritain's'Hidden Britain' campaign. The Samsonite brands arecollectively worth over 40 per cent of the luggage andtravel accessory market in the United States of America.Samsonite's research showed similarities betweenSamsonite customer profiles and VisitBritain's target marketand also that 70 per cent of travel plans had not beencompleted when luggage was purchased.

In March 2003, Samsonite promoted Britain as its monthlyleisure travel destination across its 200 stores in America.The promotion included:

� Britain images, marketing messages and consumer promotions featured on in-store posters and displays.

� Britain theme and messages attached to luggage tags and other products throughout the store.

� Sweepstake competitions to encourage the purchase of Samsonite luggage.

� Consumer brochures offering special packages and travel offers to customers.

VisitBritain featured in the Samsonite and its partnercompanies websites.

Case study of OPI Cosmetics' US$1 millionadvertising campaign for VisitBritain

11


The British Collection by OPI Cosmetics

This advertising campaign was run with OPI Cosmetics.Concentrating on nail polishOPI developed a range ofcolours with a distinctlyBritish theme. Colours withnames like 'BlushinghamPalace', 'Edin-burgundy' and 'My throne for acranberry scone' the OPIpartnered VisitBritain inpromoting its new collection.VisitBritain benefited from the US$1 million that OPIspent in advertising, while in return it organised pressfamiliarisation trips (for which Virgin Atlantic and the Savoy Hotel donated flights and accommodation). The images used were classically British.

2.9 In 2003, VisitBritain commissioned consultants to carryout qualitative research to help understand the relativeimportance that visitors attribute to different elementsof the visitor experience and how visitor satisfactionaffects the likelihood of return. The results of the first stage of this work have informed the developmentof a visitor satisfaction questionnaire which VisitBritainis piloting in the United States of America duringautumn 2004.

2.10 VisitBritain has moved toward analysing and defining its target markets using lifestyle segmentation (forexample, age, wealth, interests) to provide a moresophisticated and specific visitor profile for each market.Figures 12 and 13 show examples of VisitBritain's use of 'lifestyle' segmentation in four countries.

VisitBritain is improving its awarenessof best practice among other national tourism organisations2.11 To keep abreast of global trends among national tourism

organisations, VisitBritain uses shared informationgained through forums like the European TravelCommission whose membership includes 33 Europeannational tourism organisations (and whose VicePresident is currently VisitBritain's Chief Executive).

2.12 In 2004, VisitBritain commissioned specific researchinto the practices of eight other national tourismorganisations. The aim was to provide relevantinformation and a set of recommendations which couldbe implemented by VisitBritain as a means of improving

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VisitBritain's 'lifestyle' segmentation used in Spain and Portugal12

Sinks/Dinks

(Single-income-no-kids/double-income-no-kids)

University Students

Conference and incentivetravellers


Spain and Portugal

Aged 25-44, highly educated, urban dwelling, middle to upper social class and likely to beinterested in Britain's culture, language and varied scenery.

Aged 18-26, in tertiary studies living in and around larger cities. Attracted by Britain's musicand fashion scene.

Business travellers situated around the larger cities.

VisitBritain's 'lifestyle' segmentation used in Argentina and Brazil13

Youth

Young Professional

Cultured Elite


Argentina and Brazil

Aged 15-20, from elite households. Suitable products are language courses, vocational trainingand United Kingdom tours.

Aged 20-29, keen to develop and enhance careers. The potential lies in trade fairs, exhibitionsand professional/language training.

Aged 35-60, the wealthiest segments of the population, likely to be doctors or lawyers forexample. Potential for regional visits; they will tend to stay in more expensive accommodation.

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its performance in relation to its competitors.13 Theresearch did not set out directly to compare VisitBritainwith the other national tourism organisations becausethey vary widely in terms of structure and status, budget,the rationale for state involvement in tourism, and thenumber of offices and staff. The research therefore didnot draw definitive conclusions or 'rate' VisitBritainagainst them. The key recommendations the researchidentified are shown in Figure 14 and VisitBritain isconsidering them as part of setting its future strategy.

2.13 The research identified examples of innovative marketingand promotional activities that have been successfullyundertaken by other national tourism organisations, anexample of which is given in Figure 15.

VisitBritain's partners are generallysatisfied with the organisation's overseas marketing activities thoughsome businesses feel excluded from the planning process2.14 As part of VisitBritain's key priorities set out in its

International Marketing Strategy for 2003-04, VisitBritainstated its intention to achieve a strategic partner andtrade satisfaction score of 87 per cent or more.VisitBritain's strategic partners are the publicly fundednational and regional tourist boards within Britain. By'trade' VisitBritain means organisations operating withinthe tourism industry, for example regional marketingconsortia, hotel and self-catering groups, attractionsoperators, incoming tour operators, events organisers,and transport operators.

2.15 The latest satisfaction survey of VisitBritain's strategicpartners was conducted by VisitBritain in March 2004.The survey built on two previous surveys carried out bythe British Tourist Authority in 2002 and 2003, and forthe first time the English Regional DevelopmentAgencies were included in the list of partners. AsVisitBritain has, since April 2003, been funded tomarket England domestically, it is difficult to makedirect comparisons with the levels of satisfaction inprevious years. However the survey does give a usefulinsight into VisitBritain's strategic partnership working inits first year. The results of the 2003-04 strategic partnersatisfaction survey reveal that:

An example of best practice identified by VisitBritain'scomparator research and VisitBritain's response

15

The Canadian and French national tourist organisations setup product development partnerships designed to uniterelated businesses in co-operative ventures in terms ofproduct and service quality improvement. Product clubs arematch funded by the Canadian national tourist organisationfor their first three years, after which partnerships should beestablished as sustainable entities. The researchrecommends VisitBritain explore the introduction of productclubs as a means of effective marketing and obtainingprivate sector buy-in.

In response, VisitBritain commenced development of itsown 'club concept' in May 2004. These 'clubs' will providea focal point for the tourism industry to share intelligence,product development news, best practice and co-ordinatedmarketing activity on special interests in tourism - forexample, food and drink, culture, luxury, and sport.

Source: 'Assessment of the structure and function of competitornational tourist offices'. Moffat Centre for Travel and Tourism BusinessDevelopment and The Travel Business Partnership.

A summary of the recommendations for VisitBritain from the national tourist officesbenchmarking research

14

VisitBritain should:

� promote the complexity and richness of Great Britainas a destination and review thinking about GreatBritain as a key leisure destination. Marketing shouldbecome VisitBritain's primary focus and other aspects,such as quality assurance and information provisionshould be secondary;

� drive forward innovative branding for Great Britainusing industry wide and cross sector buy-in based onsuccess criteria;

� drive successful partnerships with the emergingRegional Development Agencies through the realisationof 'product development clubs' built around key nichemarkets such as culture, heritage and health;

� continue to develop a presence in major emergingmarkets in South East Asia and review its overseaspresence in established markets, particularly long-haul markets;

� stretch the appeal of Great Britain through productand activity 'mixing' that promotes combinedurban/rural, retail/activity products and services;

� become the provider of 'state of the art', timely anduser-friendly research. Data provision should gobeyond mere statistical analysis, benchmarkcomparison and case study research;

� continue to look to film and television relationshipmarketing to build positive profiling for the GreatBritain product;

� be involved with city destinations to market business tourism.

Source: 'Assessment of the structure and function of competitornational tourist offices'. Moffat Centre for Travel and Tourism BusinessDevelopment and The Travel Business Partnership.

13 'Assessment of the structure and function of competitor national tourist offices'. Moffat Centre for Travel and Tourism Business Development and The Travel Business Partnership. April 2004.

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� they are generally satisfied with their workingrelationships with VisitBritain's marketing, publicrelations, research and strategic partnership teams;with VisitBritain's overall communication with itsstrategic partners; and VisitBritain's overall supportto its strategic partners;

� half of the partner organisations are dissatisfied withtheir input into VisitBritain's strategic direction;

� overall, 65 per cent (against a target of 87 per cent) ofrespondents gave a rating of 'satisfied' or 'verysatisfied' compared with 88.2 per cent the year before.

2.16 VisitBritain's separate trade satisfaction survey sets out notonly to measure the tourism industry's overall satisfactionwith VisitBritain's services, but also to better understandhow the organisation can further improve its services inthe future. The results of the 2004 survey (which mirroredprevious surveys carried out in 2002 and 2003) show aclear improvement (Figure 16) though the satisfactionscore, at 70 per cent is still below the 87 per cent target.

2.17 VisitBritain considers that the 2004 satisfaction scoreswere below target due to the initial uncertainty causedby launching a new organisation with a new, and wider,remit. VisitBritain is aiming to improve its satisfactionratings by developing more effective methods ofcommunicating with its strategic partners and thetourism industry. For example it has created theVisitBritain Prospectus, aimed at improving awarenessof the range of products and services VisitBritain has tooffer. It is also working to improve client contact andfeedback to partners.

2.18 Respondents to the trade survey were asked whetherthey felt VisitBritain had helped them in their overseasmarketing activities in 2003. The responses are shown inFigure 17. Of those who stated that VisitBritain had nothelped them market their products and servicesoverseas, the most frequently quoted reason was thelack of communication and the cost of participating inVisitBritain's marketing campaigns.

Satisfaction with VisitBritain’s overall support to the United Kingdom travel trade16


0

10

20

30

40

50

60

Very satisfied

2001

Satisfied Dissatisfied Very dissatisfied Not used/unawareof services

Don’t know/No answer

Perc

enta

ge

2002 2003

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2.19 The tourism industry is very fragmented, encompassingenterprises as diverse as retailers, car hire companies,and local authorities as well as the more obvioustourism businesses such as hotels, attractions andrestaurants. In 2002 there were around 129,500 tourismrelated enterprises14 registered for VAT purposes in theUnited Kingdom of which 77 per cent were smallbusinesses, and many more tourism related businessesare known to be operating beneath the VAT registrationthreshold. The industry's fragmented nature and size,makes it difficult for VisitBritain to communicate pro-actively with the whole industry. However, VisitBritaindoes have a number of avenues available forcommunication and consultation with the tourismindustry, although there is a degree of dependence onindividual businesses having access to the internet.

2.20 VisitBritain's main means of communicating with the industry is through its trade website(www.visitbritain.com/ukindustry) where tourismbusinesses can access regular publications, such asVisitBritain News and its United Kingdom IndustryUpdate. Additionally, the VisitBritain News publicationis regularly sent by post to around 3,500 businesses and VisitBritain also emails its United Kingdom Industry Update to around 4,000 businesses directlyeach month.

2.21 The British Tourism Development Committee isVisitBritain's main consultative mechanism with thetourism industry. The Committee acts as a forum fordiscussion and representation to Government,VisitBritain and other statutory tourism organisations.The Committee has over 50 members including all ofthe key trade associations, but also organisations such asthe Youth Hostel Association and Farmstay UK whichrepresents small and medium sized enterprises.VisitBritain relies on these trade organisations tocommunicate information to their members. It alsoconsults with marketing specific groups, such as theYouth Marketing Action Group and North AmericasInterest Group.

2.22 Despite the consultation methods available, some of ourfocus group participants said they are not consulted on VisitBritain's future direction and as a result feel they cannot always fully understand VisitBritain's overall strategy. They largely feel that input toVisitBritain's strategic direction is limited to thosemaking a financial contribution.

"You don't actually see the whole strategy, soanything they do looks tactical…"

2.23 Participants in our focus groups felt that in some waysVisitBritain's communication with industry wasimproving though they drew a distinction between theefforts required by the group members to makethemselves aware of VisitBritain's plans and VisitBritain'sefforts to keep industry aware. Participants claimed thatthis has meant they learn about campaigns too late to bepart of them, only knowing about planned events ingood time if they were approached to providepartnership funding. Hence they feel there is a bias incommunication to the bigger organisations who weremost often those with the biggest financial involvement.

"We find we struggle to see our place withinVisitBritain"

2.24 In May 2004, a new Enterprise Unit was launched byVisitBritain to increase the tourism industry's engagementwith its marketing activities, and other services. The Unitaims to provide more focused support for the industry,exploit the commercial expertise available withinVisitBritain and develop new opportunities for marketingBritain to wider audiences around the world.

Did VisitBritain help market trade partner’s products overseas in 2003?

17


Yes - definitely18%

Yes - to someextent 28%

No16%

Don’t know/unableto assess

37%

14 Great Britain Labour Statistics 2002.

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Overall VisitBritain is moving towardsmore cost-efficient customer interfaces2.25 VisitBritain communicates with potential visitors to

Britain in a range of ways. These include walk-incentres, call centres (that also handle text and emails),and instant messaging.15 The late nineties saw afundamental shift in the way tourist information isdistributed. Eighty per cent of VisitBritain's main point ofcontact with customers is now through the internetor by direct marketing16, with only 20 per centthrough walk-in centres and telephone calls.Consequently, VisitBritain has placed a greateremphasis on customer relationship management andelectronic communication.

2.26 VisitBritain's increasing use of new media technology isunderpinned by the website www.visitbritain.comwhich was rated by the Financial Times as 'the bestoverall' national tourism organisation website in areview in April 2002. Now available in 35 markets withlocal language, the website enables potential visitorsaround the world to access information covering cities,towns, events and all types of accommodation andtourist attractions. In the first six months of 2004, onaverage 540,000 separate individuals a month accessedpages on VisitBritain's website.

2.27 VisitBritain's work in identifying potential customers forBritain's tourism product has become moresophisticated. VisitBritain has invested in a customerrelationship management system17 which capturesnames and addresses and visitors' interests and thewebsite provides a data capture capability which is fullyintegrated with the customer relationship managementsystem. Together, these new media technologies enableVisitBritain to target potential visitors through directmail and email, with personalised, relevant and timelyinformation. VisitBritain staff are encouraged never to leta data capture opportunity go and customer details areconstantly added to their customer database. VisitBritainhas over 4.2 million validated records on its customerdatabase and is aiming for six million by 2006.

2.28 The customer database is not only of importance toVisitBritain, but also to the parts of the tourism industrythat use it in analysing, researching and targetingvisitors. VisitBritain approaches partners with theinformation and whilst data protection laws sometimesprevent the direct exchange of names, VisitBritain canemail campaign material to the kind of people partnerorganisation's research suggests would be mostinterested. A toolkit developed by VisitBritain allows arange of partners and its overseas offices to tailor theirmessages whilst maintaining the VisitBritain brandthrough tone, colours and images.

2.29 Following the restructuring of VisitBritain's internationaloperations into eight regional hubs (Figure 6 on page 10),completed in 2003-04, and the growing demand bycustomers for quality information 'at a press of a button',VisitBritain is moving away from the provision of walk-in visitor centres. For example, VisitBritain's New Yorkoffice stated that three years ago it would expect toreceive approximately 50,000 walk-in enquiries a year,but now it expects around 15,000, despite being locatedon Fifth Avenue. Instead, the New York office is in theprocess of diverting staff resources to a contact centrewhich handles telephone enquiries to reduce theproportion of 'lost' calls, currently as high as 30 per cent, which are abandoned before the caller gets through to a member of staff.

2.30 In 2003-04 the rental costs of VisitBritain's overseasoffices totalled nearly £1.26 million (see Figure 18 forbreakdown of rental costs for the eight regional hubsand satellite offices). Walk-in centres are expensive interms of both staff and rental costs and VisitBritain hasimplemented reforms to achieve the Department forCulture, Media and Sport's target to reduceinfrastructure costs by 10 per cent over the next threeyears. As part of this, in some locations, such as Berlin,Hong Kong and Dubai VisitBritain is co-locating itsoffices with those of the British Council which offersVisitBritain significant savings in rental costs. In additionmany overseas offices have reduced their walk-infacilities to reception status with computer presentationand printed material. However, any customer wishing todiscuss a visit to Britain with a member of staff wouldnot be turned away.

15 Instant messaging is a service that alerts internet users when, for example, friends, colleagues or businesses (from a list they have devised) are online.It allows instant communication between parties.

16 Using personal data to target potential visitors with market information of tourism products and services that mirror the interests, tastes and aspirations of an individual.

17 A software application that allows VisitBritain to manage every aspect of its relationship with a potential customer. Customer information is captured in a centralised database.

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Net rental costs of the eight overseas regional hubs and associated satellite offices in 2003-0418

Net rental costsfor regional hubs

in 2003-04

(£)

304,000

85,000

48,000

82,000

15,000

94,000

135,000

63,000

£826,000


Net rental costsfor associated

satellite offices in2003-04

(£)

71,000

79,000

9,000

51,000

9,000

50,000

63,000

107,000

£439,000

Regional hubs and associated satellite offices1

Americas (hub based in New York) covering USA, Canada, Brazil, Argentina

Asia (hub based in Tokyo) covering Japan, Hong Kong, Singapore, India, plusChina, Korea, Malaysia

Australasia (hub based in Sydney) covering Australia, New Zealand

Central Europe (hub based in Frankfurt) covering Germany, Austria, Switzerland,plus Poland/Russia

Middle East/Africa (hub based in Dubai) covering Saudi Arabia, South Africa, plusKuwait, United Arab Emirates and Egypt

Nordic (hub based in Stockholm) covering Sweden, Finland, Norway, Denmark

Southern Europe (hub based in Paris) covering France, Italy, Spain, Portugal

Western Europe (hub based in Ireland) covering Ireland, Netherlands, Belgium

Total rental costs for 2003-04

NOTE

1 Regional hubs are responsible for the marketing strategy for the region, including the collection of market intelligence and theconsumer interface strategy, and central administrative functions for the region. Satellite offices are responsible for the implementationon the marketing strategy in country, including the management of relationships with the local travel trade, media and consumers (seeFigure 6 on page 10).

Part 3


VisitBritain's overseas marketingactivities achieve a high return

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3.1 This part of the report looks at VisitBritain's methods formeasuring the return on investment from the moneyinvested in overseas marketing. In particular it looks athow VisitBritain calculates its return on investment, itstreatment of non-government funding, its handling ofnon-respondents to questionnaires and its use of theInternational Passenger Survey data published by theOffice for National Statistics.

3.2 Return on investment is VisitBritain's principal target butthe Department for Culture, Media and Sport also setsrelated targets for the regional and seasonal distributionof the additional expenditure that VisitBritain generates.These targets contribute to the Government's aim topromote sustainable economic growth and to ensurethat the benefits of inbound tourism are spreadthroughout Britain. They are also intended to help toensure that popular destinations do not suffer adverselyduring peak seasons. Figure 19 shows the targets andachievements for regional and seasonal spread for thelast four years.

VisitBritain aims to return £29 to the United Kingdom economy for everypound it spends in 2004-053.3 The return on investment that VisitBritain generates is

shown as a ratio between its grant-in-aid and the levelof additional expenditure by overseas visitors. Figure 20shows the target and reported performance over the pastfour years.

3.4 The return on investment ratio is expressed as theamount of additional or incremental visitor spendgenerated as a direct result of VisitBritain's grant-in-aidexpenditure (Figure 21 on page 22). The calculation ofincremental spend is based on an estimate from surveyquestionnaires of the number of nights spent in Britain asa result of a VisitBritain campaign or activity andincludes any additional nights spent by visitorsencouraged to extend their stay. Visitor expenditure iscalculated by applying this to the International PassengerSurvey data on average spend per day per visitor.

Regional and seasonal spread of expenditure by overseas visitors to Britain

Financial Year 2004-05 2003-04 2002-03 2001-02

Target Target Achieved Target Achieved Achieved1

Regional Spread - additional spend generated 61% 60% 58% 57% 60% 64%outside London

Seasonal Spread - proportion of additional spend 34% 32% 42% 31% 23%2 29%generated between October and March

NOTES

1 There were no targets set for 2001-02. Results achieved in 2001-02 were taken as a realistic baseline to establish targets for thefollowing years.

2 The results were below target due to, respectively, the aftermath of the terrorist attacks on September 11th and the lead-up to the warin Iraq.


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3.5 The International Passenger Survey is a sample surveycarried out by the Office for National Statistics for itsown purposes and those of a number of otherGovernment departments. The results are based on 'faceto face' interviews with a sample of passengers as theyenter or leave the United Kingdom by the principal air,sea and tunnel routes. The Office for National Statisticsproduces results from the International Passenger Surveyon a monthly, quarterly and annual basis. The datacollected includes country of visit (for United Kingdomresidents), country of residence and region of the UnitedKingdom visited (for overseas residents), expenditure,purpose of visit, length of stay, age group, gender, modeof transport, port, year and season of visit.

3.6 The stakeholders we consulted about VisitBritain'sevaluation methodology knew little about the actualprocess. There was some confusion about the basis of thereturn on investment and greater transparency about themethodology would be appreciated so that stakeholderscan understand the impact being claimed.

Non-government funding is not includedin the calculation 3.7 In 2003-04 VisitBritain attracted £12.77 million in non-

government funding from industry partners and othercommercial activities. However, the calculation of thereturn on investment excludes non-government fundingfrom the investment component and implies that alladditional spend is a direct result of the Government'sinvestment. Including non-government funding in thecalculation would enable the impact on the wholeBritish economy to be reflected in both the cost andbenefit side of the ratio, rather than just on the benefitside. Figure 22 shows the effect on the return oninvestment ratio if non-government funding is taken intoaccount over the last four years.

VisitBritain's return on investment targets andachievements

2004-05 2003-04 2002-03 2001-02 2000-01

Grant-in-aid 35.5 35.5 35.51 35.5 37.02(£ million)

Target 29:1 28:1 28:1 31:1 30:1

Achieved n/a 30:1 30:1 26:12 31:1

NOTES

1 In addition to the £35.5 million grant-in-aid an extra£14.2 million was granted to help overcome the effects ofthe foot and mouth outbreak and the terrorist attacks onSeptember 11th. VisitBritain did not include this in theamount it had invested when calculating the return oninvestment ratio as this was subject to a separateevaluation.

2 Year of the foot and mouth outbreak and September 11thterrorist attacks.


20

Calculating incremental spend: an example.Information Services - France

21

In 2002-03, a total of 74,777 enquiries were made to theoverseas office in Paris as a result of promotional activity that year. VisitBritain sent questionnaires to a sample of 3,000 people who had made enquiries from which a response rate of 41 per cent (1,241 replies) was achieved.75 per cent of survey respondents had visited Britain since contacting VisitBritain, some 56,083 people in total.732 (59 per cent of respondents) replied to say they weredefinitely influenced to visit and 50 (4 per cent) said theywere encouraged to stay longer as a result of VisitBritainactivity. VisitBritain assumes that the same percentages of all enquirers were influenced and applies their stated average length of stay and party size as follows:

DefinitelyInfluenced

Encouragedto stay longer

Numberof visitors

33,089

2,243

Averagelength ofstay (days)

9.5

4.9

Averagenumberof visitorsin party

3.1

2.6

Totalnights

974,471

28,576

Spending estimate: VisitBritain assumes that all Frenchvisitors spent the same as the average for all holiday visits byFrench residents which the International Passenger Surveyrecorded as £42 per night.

Total incremental spend:(974,471 + 28,576) x £42 = £42,127,974

All incremental spend across all nationalities of visitors isdivided by the grant-in-aid to give a return on investment.


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VisitBritain's return on investment figure is overstated due to the treatmentof non-respondents 3.8 At present, when estimating the behaviour of visitors

from answers to questionnaires, VisitBritain assumes thatnon-respondents behave in the same way as those whoreply to the questionnaires. This approach gives the mostgenerous estimate to the additional spend caused byVisitBritain's activities and, therefore, the highest returnon investment figure.

3.9 Following early discussions with the National AuditOffice, VisitBritain commissioned consultants to identify(within reasonable statistical limits) the differencesbetween respondents and non-respondents to theirquestionnaires so that any differences that are identifiedcan be taken into account in the return on investmentcalculation. The research18 showed that a degree of non-response bias19 was present in all the VisitBritainevaluation studies analysed and that consequentlyVisitBritain is likely to be overestimating its influence onnon-respondents. The degree of non-response bias variedconsiderably between activities and campaigns and thereport recommends that VisitBritain should reduce theiraggregate incremental spend figure by around 20 per centto take account of non-response bias. This should be aninterim adjustment while VisitBritain develops moresuitable formulae based on the different levels of non-response bias associated with different markets andtypes of campaign.

Return on Investment (RoI) ratios excluding and including non-government funding 22

Financial Year

Grant-in-aid

Non-government funding for international marketing4

TOTAL

Incremental spend

RoI based on grant-in-aid only

RoI based on total resources

2003-04£ million

35.50

7.22

42.72

1,079.60

30:1

25:1

2002-03£ million

35.001

6.00

41.00

1,060.20

30:1

26:1

2001-02£ million

33.402

4.60

38.0

879.30

26:1

23:1

2000-01£ million

37.023

7.51

44.53

1,143.00

31:1

26:1

NOTES

1 £500,000 of grant-in-aid is excluded because the Department for Culture, Media and Sport agreed that it could be used to meet partof the re-organisation costs arising from the merger of the British Tourist Authority and the English Tourism Council.

2 The grant-in-aid figure of £33.4 million used to calculate the return on investment figure is £2.1 million less than the total amountreceived (£35.5 million) from the Department for Culture, Media and Sport. The £2.1 million was specifically re-allocated to activitiesto counter the impact of the foot and mouth outbreak on the tourism industry (which an additional fund of £14.2 million had alreadybeen established) and was evaluated and reported separately. Later, £5.3 million of this fund was transferred to support the 'UKOK'initiative. Return on investment figures of 15:1 and 23:1 respectively were reported on the £11 million spent to counter the impact ofthe foot and mouth outbreak and the £5.3 million spent on the 'UKOK' initiative.

3 Includes £1.5 million allocated to the London Tourist Board. Since 1 April 2001, this element of the grant has been channelled directto the Greater London Authority.

4 For the purpose of this calculation we have excluded elements of non-government funding that were not provided as partnershipfunding for marketing campaigns, for example, the gross income from sales of passes and tickets, which is passed on to otherorganisations after deducting VisitBritain's handling fee. We have also excluded amounts that were provided for specific activites thatwere subject to separate evaluation: £5.5 million for the 'UKOK' campaign in 2002-03, and £4.4 million for foot and mouth recoveryin 2001-02.


18 'VisitBritain evaluation programme - non-response report'. University of Luton. July 2004.19 Non-response bias means that those who do not respond to a survey behave differently from the group that does respond.

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In other respects there are likely to be under-estimates of the return on investment 3.10 VisitBritain's questionnaires ask whether the information

they provided turned a possible visit into a certainty. Theresponses open to visitors are: 'definitely', 'probably','probably not', 'not at all' and 'don't know'. Only thosewho answer 'definitely' are counted. The University ofLuton research suggests that VisitBritain's approach maybe unduly conservative. By ignoring the 'probably' and'possibly' responses they may be underestimating theirdegree of influence on visitors and the added value thiswould generate. The University of Luton recommendsthat a 'probably' influenced response should beweighted at 50 per cent in conversion calculations.

3.11 There is also a possible underestimation because thereported return on investment does not include theincremental spend for visitors VisitBritain influenced butwho travelled after the evaluation survey was sent out(which is typically around nine months after thecampaign). There is possible scope for VisitBritain tocarry out some further evaluation after a longer period inorder to generate some information about the longerterm impact of its campaigns though it would need toexamine the cost-effectiveness of this.

3.12 The research concluded that it was not possible to assesswhether the over-estimates of 20 per cent associated with the non-responses are cancelled by these possibleunder-estimates.

The questionnaire response options onextended stays are less refined than thoseon influenced to visit3.13 When ascertaining whether visitors were encouraged by

VisitBritain activity to extend their trips the questionnaireonly offers two response options: 'yes' and 'no'. Thismeans that anyone slightly (though not primarily)encouraged by VisitBritain information will be countedin the incremental spend calculation.

3.14 Extended stays contribute around seven to eight per centof the total incremental spend figure that VisitBritainreports so the questionnaire design will not be causingsignificant distortion in the overall return on investment.However, the contribution extended stays make toincremental spend can vary considerably betweencampaigns so it could be causing some distortion in theassessment of the relative success of individualcampaigns. It would be more consistent and provide amore accurate indication of the impact of its campaignsif VisitBritain included the same range of responseoptions for people extending their visit (paragraph 3.9) asthose offered for the decision to visit.

The data on spend per visitor has some weaknesses3.15 Using International Passenger Survey data to estimate

tourist spend has some limitations. The primary focus ofthe International Passenger Survey data is to providefigures on migration and balance of payments, but it alsoasks questions of overseas residents visiting the UnitedKingdom aimed at estimating visitor spend.

3.16 International Passenger Survey spending figures forvisitors from overseas exclude all payments for air andsea travel to and from the United Kingdom, regardless ofwhether the carrier is British. This is because travel iscounted elsewhere in the Office for National Statistics'balance of payments calculation. Therefore the estimates of average visitor spend in the British economymay be underestimated.

3.17 There is also currently no adjustment to the visitor spendfigures for VAT reclaimed by non-European visitors. TheOffice for National Statistics has considered introducingone but feel that it is not possible because the point atwhich they are able to interview visitors leaving Britain isbefore entry to the area where visitors can make theirVAT claim.

Part 4


There is a tension between VisitBritain'slong and short term objectives

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4.1 This part of the report considers how well VisitBritainmanages the balance between short term marketingactivities undertaken in order to achieve its annualreturn on investment target and longer term marketingstrategies aimed at strengthening the Britain brand,particularly in new and emerging markets.

The emphasis on return on investmentleads to VisitBritain focusing on shortterm tactical20 campaigns 4.2 VisitBritain has used the return on investment target to

provide a mechanism to ensure the organisation wasinvesting money overseas wisely when, in the latenineties, it was operating in 51 countries around theworld. In pursuing the return on investment target,VisitBritain reduced the number of its overseas offices to 27 and introduced a more rigorous campaignevaluation process.

4.3 The return on investment target, and the need torespond to recent crises, have led VisitBritain toundertake an increasing number of short term tacticalcampaigns. Such campaigns, using offers attractive on aprice basis, were put to good effect after the foot and mouth crisis and after the terrorist attacks onSeptember 11th, where their primary role was toencourage as many visits as possible to Britain. Some ofthese campaigns also had a longer term aim ofre-building the perception of Britain as an attractivetourism destination, as was the case with the 'MillionVisitor Campaign' in 2002. Figure 23 illustrates a shortterm tactical campaign.

There is a risk that partnership fundingcan cause VisitBritain's campaigns to be even more focused on short termobjectives and that smaller businessescan feel excluded from the benefits4.4 Obtaining additional funds from partner organisations

gives VisitBritain greater financial leverage, enabling itto maximise return on investment and there might alsobe a less visible incentive for VisitBritain to seekpartnership funds because these funds are notaccounted for in the return on investment calculation(see paragraph 3.7). Naturally it is the larger businessesthat are more able to help VisitBritain with partnershipfunding and for these reasons the Department forCulture, Media and Sport prefers not to set targets for thelevel of partnership funding that VisitBritain shouldachieve each year.

20 The primary aim of short term tactical campaigns is to encourage as many tourists as possible to visit Britain within a defined time period. To encourage visitors, attractive prices on specific travel and accommodation options are offered as part of the campaign.

European Short Breaks campaign23

Aim: To establish Britain as the short breaks destination forEuropean travellers.

VisitBritain Funding: £2.2 million.

Partnership Funding from the tourism industry:£1.8 million.

Eleven cities showcased across Britain, with 63 partnersincluding national and regional tourist boards and regionaldevelopment agencies (contributing a total of just under £1 million) and tourism businesses such as British Airways,BAA, P&O Ferries, Stena Line, SeaFrance and RadissonHotels (contributing just under £800,000 in total).American Express and MG Rover also contributedmarketing support.


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4.5 Partnership involvement is currently on a tiered basis(Figure 24), with the level of promotion for the partnerdependent on the amount of funding from theorganisation. Smaller businesses can be part ofcampaigns, through quite low levels of investment orwithout any investment. For example, the 'MillionVisitor Campaign' was rated as highly successful by thestakeholders we consulted, in part because VisitBritainmanaged to bring together thousands of special offersfrom small businesses across the country on its website.

4.6 The influence of the 'big players' in VisitBritain'smarketing activities risks distorting campaign objectivesin favour of short term tactical objectives. These focuson increasing the number of overseas visitors in aspecific time frame, rather than longer term marketingactivities that draw out the distinctiveness of Britain,promoting the country as a desirable destination.

4.7 However by including 'special price offers' as part of itscampaigns, VisitBritain supports the longer term aim ofovercoming the perception that as Britain is seen as arelatively expensive tourist destination to the benefit ofthe whole industry. In addition, it would be wrong toassume that partners are only interested in short termreturns. Large businesses are likely to benefit from brandbuilding activity and some partners, for example a citycouncil supporting the destination, would have nospecific commercial tourism product to sell.

4.8 Participants in our stakeholder focus groups generallyfelt, however, that where there was reliance on largecontributions from the 'big players' in the industry, theremight be a risk that it produced an unreflective andundifferentiated picture of what the British tourismindustry has to offer. VisitBritain's strategic partners, themajority of key stakeholders within the tourism industryand our expert panel members concurred that evenwhere there are major financial contributions from theprivate sector, building the Britain brand should be the overriding objective of VisitBritain's overseasmarketing activities.

Parts of the industry are concerned thatthey sometimes have to compete againstVisitBritain's campaigns 4.9 As well as feeling excluded from the benefits of

campaigns, parts of the industry can sometimes perceiveVisitBritain as 'a publicly funded rival'21 in that they mayhave to compete against a VisitBritain campaign that isbased around cut-price offers from rival operators.VisitBritain considers this to be acceptable because anybusiness is welcome to suggest an offer for VisitBritain topromote. In practice, however, campaigns can only giveprominence to a limited number of offers. Participants inour focus groups felt that whilst VisitBritain should becommercially aware it should not act like a commercialorganisation by selling airline tickets, tours, andaccommodation directly on its websites.

"I feel quite sad these days that VisitBritain is in a waycompeting with us, you look at their website andthere is selling, selling, selling, selling, selling…"22

Funding tiers for the European Short Breaks campaign24

There are a range of funding levels that partners can provide,dependent on which market(s) they wish to advertise in andthe number of advertising outlets available. For the EuropeanShort Breaks campaign VisitBritain grouped the target markets according to the number of visitors they deliver toBritain per year. They grouped the advertising opportunitiesinto three groups.

Market Group

A (2-3 million visitors per year to Britain)

B (1-1.5 million visitorsper year to Britain)

C (500,000 visitors peryear to Britain)

Level 1

£40,000

£20,000

£10,000

Level 2

£10,000

£5,000

£2,500

Level 3

Free

Free

Free

Level 1 - Web and online marketing, public relations andmedia (including press trips), direct mail, trade promotionsand tactical trips.

Level 2 - Web hotlinks, public relations and direct mail.

Level 3 - Web and hotlinks (in dedicated campaign website).Free subject to partners adopting campaign branding in theirmarketing promotions.

Alternatively partners could take the opportunities across all markets at level one for £200,000 or at level two for£50,000. Level one includes membership of the campaignsteering group.


21 National Audit Office Stakeholder Focus Groups. March 2004.22 Views expressed by participants of the National Audit Office Stakeholder Focus Groups. March 2004.

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The tourism industry wants VisitBritain'scampaigns to give more emphasis topromoting the Britain brand 4.10 Part of the rationale for VisitBritain's existence is that it

provides smaller business with a route to market whichthey are too fragmented to achieve themselves.Participants in our focus groups questioned whetherVisitBritain's use of short term tactical campaigns withpartnership funding means it is actually undertakingactivities which are best done by the private sector, andwhich primarily benefit large businesses. There wasgeneral agreement amongst the members of the focusgroups that VisitBritain should promote B

Documents

VisitBritain: Bringing visitors to BritainGreat Britain as a value for money destination. c Parts of the industry sometimes feel they have to compete against VisitBritain's short term